Thursday, 26 April 2012


Business may face a £190 billion funding gap within 5 years unless more is done to stimulate lending - a Government backed taskforce warned recently.

Many small businesses are struggling as banks rein in loans. The committee, lead by Legal & General boss Tim Breedon warned that problems will intensify when demand for credit increases as the economy expands in recovery.

The report predicts that demand from businesses for credit will outstrip supply by at least £84 Billion and up to £190 Billion over the next five years.

This report comes at a time when George Osbourne has intensified his efforts to make funds more accessible to SMEs.

Tim Corfield April 2012

Monday, 23 April 2012


Europe’s biggest banks could see the amount of capital they are required to hold in reserve more than double. Current plans due to be fully implemented within the next seven years could require banks to hold a minimum of 7% of core capital to act as a buffer against potential losses. However, the EU is now considering requiring the banks to have as much as 17% in reserve in an attempt to avoid another Lehman style bank collapse. The Treasury is preparing a White Paper on new capital rules for UK banks that is expected to be published soon. It will pave the way for putting into law the recommendations of the Independent Commission on Banking for restructuring the UK banking industry. Under the rules, British retail banking businesses would be required to maintain a minimum core capital ratio of 10%, to ensure that retail deposits are not put at risk in a future crisis.

Tuesday, 10 April 2012


Company insolvencies were up 7.4 per cent during the final report of last year in England and Wales compared to the same period in 2010.

Overall, there were 4,260 compulsory and creditors’ voluntary liquidations (CVLs) – 0.4% increase on Q3 (three months ended 30th September 2011) according to statistics released by the Insolvency Service.

Compulsory liquidation recorded the biggest increase at 1,389 – any increase of 14.1% on Q3 and 16.1% on the same period from the previous year.

The number of CVLs recorded a 5.1% drop on Q3 yet this was still 3.4% up on the same period in 2010.

Frances Coulson, President of R3 said “We have known for a while that many businesses are surviving but not thriving, operating as “zombies” and eventually some will have to fail. This is certainly the calm before the storm. In fact if the economy is to recover, we must see some businesses fail to allow viable ones to thrive”.

The statistics indicate a beginning of a change in the mentality of lenders. It appears that this may be the beginning of a reduced appetite to continue to support stressed companies.


The High Court recently judged that the liquidator of a company had been wrong to pursue two companies’ directors for wrongful trade.

In this case the company had been set up to utilise satellite technology and offer broadband internet access to the rural areas in the UK which was seen as a market opportunity that was not being taken by other providers.

The factor that triggered the directors’ decision to cease trade was that its main supplier of satellite services ceased the supply without providing any notice leaving the company unable to trade.

Under Section 214 of the Insolvency Act (wrongful trade) directors can be personally liable if they allow the company to carry on trading after the point when they “had known, or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation”.

The company had always been under capitalised, had always traded at a loss and it probably had been always insolvent on a cash flow basis.

However, the High Court Registrar believed that the directors had genuinely and reasonably believed right up to the point of liquidation that the company could be saved and had done all that they reasonably could to minimise the potential loss to creditors.

The Registrar appeared to acknowledge that the main reason for the liquidation was probably the failure of the any available satellite provider.

What can be learnt from this recent decision?

It is all too easy to assess director’s conduct with the benefit of hindsight. The Registrar said that the question of culpability is based purely on the information which was know or ought to have been known by the directors at the relevant time.

It is up to the liquidator to identify the precise date which he believes the company became insolvent and then consider the reasonableness of every director’s decision.

Another important lesson arising from this case is that directors should always make careful and dated notes and document all decisions and actions that they take to protect the creditors.


The Greek ‘debt deal’ has now been secured which kicks the problem firmly up the road.

In immediate terms this should have a massive positive effect for the EU and this has avoided a huge disorderly default.

This debt write down of bonds now paves the way for further aid to be advanced to Greece allowing it to meet its obligations under bond redemption later this month.

This still amounts to the biggest sovereign debt default in history. Greece will still be under a huge ongoing debt burden. The best possible outcome is expected to be a debt to GDP ratio of 120 per cent by the end of this decade.

Most economists (and politicians) know that this is unsustainable – the outcome is much more likely to be worse. This is far from the final restructuring of Greece’s massive national debt.

Unfortunately, this default now increases speculation that Portugal could follow the same path.

Yet, Nicholas Sarkozy recently declared that the Greek “Problem is Solved”. Is there a French election looming?...This seems to me to be mighty optimistic! Watch this space….


George Osborne has recently been reported that his objective is to reduce corporation tax to 20% which is significantly lower than other Western economies and would be great for UK business.

Hopefully, we will hear more of this in the budget later today.

George Osborne inherited a rate of 28% from the last Government and plans to reduce it to 23% in the lifetime of this Parliament.

A further planned reduction would be a good move and would attract business to the UK.

What about the UK’s competitors? The USA has a basic rate of 35% and France over 33%. Germany has a rate of 15% but there are additional social taxes which bumps this up to a rate in excess of 30%. Conversely, Ireland which attracts many multinationals has a much lower rate of 12.5%.